Entertainment / Organizational Strategy

Fox Television Buys Small to Go Big

fox nfl

Professional sports have been a topic of great debate recently.   The National Football League, in particular, is struggling greatly with domestic violence issues among its players and how to appropriately punish the players, from the front office of the NFL to the front office of the 32 NFL teams.   But suddenly there is plenty of attention on business contracts in professional sports, as well.

A new topic has been television deals.  The National Basketball Association nearly tripled their annual TV revenue with a recently signed contract with ESPN and TNT—a previous $900 million deal has jumped to $2.66 billion.  However, with the NFL currently being the most popular, and now hot topic, in American professional sports it is very surprising to learn about the television contract 21st Century Fox signed with a local Seattle, Washington TV station.  Fox agreed to pay $10 million for KBCB-TV, who does not even broadcast to the entire Seattle area.  Why would one of the largest television companies in America focus on small market TV?

Fox has been in discussions of acquiring the KBCB Seattle local affiliate, so they have outright control over the TV station. The company is trying to buy up local stations where the NFL’s National Football Conference (NFC) teams are located. This is also the conference that Fox has entire broadcasting rights to every Sunday during the NFL season. In this case they are seeking out the Seattle Seahawks football franchise—the reigning Super Bowl Champions. They also have ownership of most other NFC markets, including New York, Chicago, and Washington D.C.

Not surprisingly Fox is in search of the big, big money.  They want to turn the $10 million investment into $50 million or who knows how much more.  It would be interesting to see how successful Fox is in Seattle with total ownership of a station, as their revenue streams would be through collecting “more in subscription fees-known as retransmission revenues… or through hot local advertising” (WSJ Flint).  These revenue streams will only increase if Fox is able to buy out the already more established KCPQ-TV Seattle.  Threatening to change their affiliation—and moving NFL games—to the smaller local station KBCB-TV gives significant leverage to Fox as KCPQ-TV would be without Fox programming, including sports and prime-time entertainment, and could cause its ratings to dive.

Interestingly enough, Fox has decided it is not just actual cash they are willing to spend to overtake NFC cities’ TV marketing.  They even “exchanged its affiliated stations in the Memphis and Boston markets for two Cox Media stations located in the San Francisco-Bay Area market” (WSJ Flint).  Fox is making professional sports business acquisitions by trading TV markets!

Where does Fox draw the line on the amount of TV stations they trade or millions of dollars they spend?  Is the risk worth the reward?  Spending money to overtake a local TV station has some business rationality, but using this smaller TV station to overtake, basically through intimidation, another more established station could be criticized and unethical in the public’s opinion.

Danny Howard


http://espn.go.com/nba/story/_/id/11652297/nba-extends-television-deals-espn-tnt

http://online.wsj.com/articles/eyeing-nfl-value-21st-century-fox-acquires-seattle-area-tv-station-1412714995

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